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Biased Managers as Strategic Commitment in a Mixed Duopoly with Relative Profit-Maximizers

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  • Yasuhiko Nakamura

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Abstract

This study analyzes a mixed duopoly composed of a social welfare-maximizing public firm and a relative profit-maximizing private firm wherein the owners of both firms hire relative profit-maximizing managers biased with respect to the market size they face. In particular, we explore the quantity competition that gives a result different from that obtained in a standard mixed duopoly that differentiates between ownership and management, as considered by (Nakamura, Theor Econ Lett 4(3), 889–896, 2014a ), which follows the approach of (Englmaier, and Reisinger, Manag Decis Econ 35(5), 350–356, 2013 ). More precisely, when we introduce the degree of importance of each firm’s relative performance into quantity competition, we see that the owner of the private firm reverts to a less aggressive manager when the degree of importance is relatively high, which is similar to how the classical strategic managerial delegation works. Furthermore, we consider the influence of an increase in degree of importance of each firm’s relative performance on the aggressiveness of managers hired by both the public and private firm. Moreover, we explore the case in which the owner hires his manager with salary based on social welfare. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Yasuhiko Nakamura, 2015. "Biased Managers as Strategic Commitment in a Mixed Duopoly with Relative Profit-Maximizers," Journal of Industry, Competition and Trade, Springer, vol. 15(4), pages 323-336, December.
  • Handle: RePEc:kap:jincot:v:15:y:2015:i:4:p:323-336
    DOI: 10.1007/s10842-015-0198-4
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    1. Hamed Jafari & Seyed Reza Hejazi & Morteza Rasti-Barzoki, 2016. "Pricing Decisions in Dual-Channel Supply Chain Including Monopolistic Manufacturer and Duopolistic Retailers: A Game-Theoretic Approach," Journal of Industry, Competition and Trade, Springer, vol. 16(3), pages 323-343, September.
    2. Nicola Meccheri, 2019. "Biased managers in a vertical structure," Working Paper series 19-12, Rimini Centre for Economic Analysis.

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    More about this item

    Keywords

    Strategic delegation; Biased expectations; Aggressiveness; Quantity competition; L20; L32; D43;
    All these keywords.

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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